2017 (1) TMI 1498 - AT - Income Tax

Reassessment proceedings invalid for AY 2006-07 due to failure to disclose material facts

The ITAT held that the reassessment proceedings under Section 147 for AY 2006-07, based on share application money from specific entities, were invalid. ... Validity of reopening u/s 147 - change of opinion - Held that:- Details of Shareholders and complete details of increase in share capital including name of shareholder, Address, PAN and confirmation. The assessee, in reply, provided the details of shareholders, PAN, Address, Share Application form, Confirmation from respective applicants along with their Board resolutions, Return of allotment, Board resolution of the assessee company regarding Share Allotment etc. After appreciating the same, the assessing officer concluded the assessment. Above facts show that the assessee has disclosed all material facts at relevant places during original assessment proceedings u/s 143(3) of the Act. The AO himself asked for specific questions and full details were supplied by the assessee. AO examined these documents and framed the assessment only after proper application of mind. There was no failure on the part of the assessee to fully and truly disclose all the material facts. Thus, reassessment is being sought by the AO on mere change of opinion and apparently on the basis of information received from the investigation wing but nevertheless, all the information was available before AO during original proceedings. - Decided in favour of assessee. Issues:Validity of reopening u/s 147 for AY 2006-07 based on share application money received from certain entities.Analysis:The appeal by the assessee contested the validity of reopening u/s 147 for AY 2006-07 based on share application money received from specific entities. The AO initiated reassessment proceedings after receiving information regarding accommodation entries and bogus bills. The reasons for reopening included the belief that the share application money received was unaccounted for. The assessee objected to the reopening, arguing that all necessary information was disclosed during the original assessment u/s 143(3). The AO, however, proceeded with reassessment, adding the amount in question. The assessee challenged this before the CIT(A) and subsequently before the ITAT.The AR for the assessee contended that all material facts were disclosed during the original assessment proceedings, and the reopening was beyond the permissible period of four years under Section 147. The DR argued that the information regarding accommodation entries constituted fresh tangible material justifying the reopening. The ITAT noted that the assessee had changed its name and that the notice for reopening was issued beyond four years from the relevant AY. The ITAT emphasized the requirement of 'failure to disclose fully and truly all material facts' as per the first proviso to Section 147. It observed that the assessee had provided all necessary details during the original assessment proceedings as requested by the AO.The ITAT referred to judicial pronouncements, including the case of CIT Vs. Kelvinator of India Ltd., to emphasize that reassessment cannot be based on a mere change of opinion. It highlighted that if there is no failure on the part of the assessee to disclose material facts necessary for assessment, reassessment proceedings after four years are not permissible under Section 147. Therefore, the ITAT concluded that the reassessment proceedings were not valid in this case and set them aside. Consequently, the assessee's appeal was allowed, rendering other grounds moot.